Tag Archives: Energy efficiency

Energy-Efficiency and Unintended Consequences

Electric vehicles are great for the environment, right? Usually, but not always. It depends on geography and when the cars are recharged.

Long ago Benjamin Franklin produced an economic analysis of Daylight Saving Time (DST). He showed how much tallow and candles would be saved if Americans arose earlier during long summer days to take greater advantage of natural sunlight. Similar energy-efficiency arguments are advanced today in support of the practice. The practice persists despite the lack of solid evidence that the troublesome time switch makes a difference.

Matthew J. Kotchen, a Yale economics professor, was able to take advantage of a “natural experiment” to find out. In 2006 Indiana switched to DST while simultaneously shifting some of its counties to a different time zone. The combination of policies allowed Kotchen and his colleague to compare differences in residential electricity consumption before and after. They found that the demand for heating and cooling differs across hours of the day and that the shift to DST increased both.

Environmentalists and public policy wonks have proposed all manner of ideas for encouraging energy-efficiency and conservation, says Kotchen, but it’s often difficult to know if they save energy or not. Some do work as advertised, but others, like Daylight Saving Time, do not.

Kotchen’s admonition should be borne in mind as Virginia plunges ahead under the Grid Transformation and Security Act and the Regional Greenhouse Gas Initiative to invest hundreds of millions of dollars in energy-efficiency and conservation. Not all energy-efficiency programs offer the same bang for the buck. Indeed, we cannot assume that all energy-efficiency programs even conserve energy!

The Yale economist found a natural experiment in Florida, which increased the stringency of its code in 2002. He compared the residential characteristics of electricity and natural gas consumption before and after the change. Initially, as expected, he found that stricter building codes reduced consumption of energy sources. But subsequent research based on California data raised questions whether the effect persisted over the long run. Kotchen revisited his Florida case study and found that electricity savings were no longer evident after five or six years, although natural gas savings did persist.

Another object of inquiry is electric vehicles (EVs). EVs run on electricity,thus reducing CO2 emissions from gasoline combustion. But charging EVs draws from the electric grid, and electricity is generated by a wide range of power sources, some green and some not. Kotchen’s research shows that the CO2 emissions attributable to EVs varies by geography — some regional transmission organizations have more renewable energy than others — and by time of day. If EVs are charged during daylight hours when solar output is at a peak, the CO2 emissions are lower than if the vehicles are charged at night when utilities rely more upon fossil fuels. In the Upper Midwest states, Kotchen found, EVs could generate more CO2 emissions than a car with an internal combustion engine.

(You can read Kotchen’s article, “Environment, Energy, and Unintended Consequences,” in the NBER Reporter.)

Human behavior is complex and often ill understood. Public policies often have unintended consequences — and energy conservation is no exception. As Dominion Energy proposes a raft of energy-saving measures in the years ahead and the State Corporation Reviews those proposals, they should adopt an attitude of humility regarding their efficacy. Virginia should not set up and run conservation programs on auto-pilot assuming that they will work as billed. Benchmarks should be established, resulted monitored, and programs periodically reassessed.

How Fast Will Electricity Demand Grow?

Source: Dominion Energy Virginia 2018 Integrated Resource Plan

Dominion projects that demand for electricity will increase 1.4% a year over the next 15 years. How accurate is that forecast? Billions of dollars ride on the answer.

The single-most important forecast Dominion Energy Virginia had to make when compiling its 2018 Integrated Resource Plan (IRP), released earlier this week, was to project electricity consumption in its service territory over the next 15 years. All of the company’s calculations regarding the need for new generating capacity spring from that forecast.

Dominion projected that overall electricity demand will increase 0.8% annually on average and that peak demand will increase 1.4%. Based on that forecast, the authors of the plan had to figure out how to increase the peak supply by more than 20%. However, if Dominion is over-estimating load growth and builds a power portfolio to match, it could spend billions of rate payers’ dollars on unneeded capacity.

The company explains its forecast methodology in considerable detail in the IRP. It uses two econometric models, one being a “customer class-level sales model,” and the other a “system-level hourly load model.” These models have been “developed, enhanced, and re-estimated annually for over 20 years,” the IRP says.

The models used this year have been tweaked to represent the findings of the most recent customer appliance survey, which observed a significant increase in the penetration of light-emitting diode (LED) lighting among residential customers. To reflect this trend, Dominion modified its models to reduce forecasts of residential lighting load. Accordingly, residential lighting usage is expected to fall by roughly half between 2018 and 2033.

Another key assumption is the rate of economic growth. Dominion observed that the Virginia economy continue to grow despite federal budget sequestration between 2013 and 2017 by about 1% per year on average (adjusted for inflation).  But Virginia has a favorable business climate, in Dominion’s estimate, and growth should pick up. Looking ahead, Moody’s Analytics projects that Virginia’s Gross State Product will expand at a compounded annual growth rate of 1.99%.

(Moody’s growth forecast is extremely close to that of the Congressional Budget Office, which projects a 1.9% compounded annual growth rate nationally over the next 10 years.)

Also, notes the IRP, Virginia should continue attracting more data centers, drawn by access to fiber optic networks as well as “low-cost, reliable power sources.” Data centers are far more energy-intensive than typical commercial or industrial operations.

The Dominion-PJM gap

Dominion acknowledges that its DOM zone forecast is higher than that of PJM Interconnection, the organization that operates wholesale electricity markets in a 14-state region. PJM has no axe to grind either ideologically or in terms of self-interest when it prepares its forecasts, so its estimates are widely regarded as credible. Dominion critics make frequent note of the discrepancy.

The first thing to note, says the IRP, is that the gap difference the two forecasts has shrunk in the past year. Here I’ve laid the forecast for “energy” (total annual electricity consumption) and “peak” (peak one-day consumption) side by side:

Energy forecast
Dominion — 0.8% annual increase
PJM — 0.9% annual increase

Peak forecast
Dominion — 1.4%
PJM — 0.8%

Thus, if I’m reading the IRP correctly, Dominion’s energy forecast is slightly more conservative than PJM’s — a fact that I’m surprised Dominion didn’t highlight in its IRP.

A big gap still remains between the Dominion and PJM peak forecast. PJM’s forecast, issued Dec. 28, 2017, was rendered out of date almost immediately by 12 consecutive days of bitter cold weather across the northeastern quadrant of the United States in December and January. PJM’s 90/10 projection of peak demand for the DOM zone was 19,512 megawatts. Actual demand exceeded  PJM’s forecast by 1,400 megawatts on five different occasions, says the IRP. (To be fair, PJM’s 90/10 projection did allow for a one in ten chance that the actual peak might exceed the forecast.)

States the IRP: “The Company understands that PJM has recognized this issue in its load forecasting and is in the process of revising their load forecasting methods.” Continue reading

Emerging Lines of Conflict in Virginia Energy Policy

The General Assembly may have ushered Virginia’s energy sector into a new era with its passage of the Grid Transformation and Security Act of 2018, but the battle over energy policy is far from finished. It’s just entering a new phase under new ground rules.

New battlefronts are emerging over energy efficiency and onshore wind power, and the potential exists for controversy to erupt over the necessity (or non-necessity) of preserving coal and nuclear generating capacity.

The grid-modernization legislation declared it a matter of public benefit to promote clean solar and wind power, to invest in energy efficiency, and to upgrade the electric grid so it will be more secure and better able to handle intermittent power sources like wind and solar. To pay for these priorities, the General Assembly agreed to let Dominion Energy and Appalachian Power Co., reinvest earnings over and above allowable rates of return instead of returning the money to rate payers.

The ink has hardly died on the governor’s signature on the legislation before new conflict points became painfully clear.

Energy efficiency. The new law commits Dominion to spend $870 million on regulated efficiency programs over the next 10 years and contribute $6 million annually to a state weatherization fund — and that doesn’t include money spent by Apco. Advocates of a low-carbon energy future envision funds flowing to programs that allow customers to buy smart thermostats, add insulation, and replace inefficient lighting and appliances.

“Unfortunately, all of that potential could easily slip away,” Chelsea Harnish, executive director of the Virginia Energy Efficiency Council, told Energy News Network. Likewise, Harrison Godfrey, executive director of Virginia Advanced Energy Economy, said he is “not convinced utilities will invest in technologies that are real game-changers.”

It seems to have dawned upon energy-efficiency advocates that the real obstacle is not the electric utilities but the State Corporation Commission, which takes a hard-nosed view on the value of energy-efficiency programs. Last month, SCC staff rejected a lighting program, appliance recycling program, and three other proposals submitted by Apco on the grounds that they did not pass cost-effectiveness tests.

“I think there is a concern that the SCC will continue to ov­­erly scrutinize these programs in a way that they’ll continuing being rejected,” Harnish said.

Energy efficiency advocates say the conservation programs will reduce electricity demand, thus delaying the need to add new generating capacity at great expense to rate payers. But the SCC likes to see solid evidence that the programs actually deliver the promised benefits at reasonable cost to rate payers. The big question: Now that the General Assembly has declared energy efficiency to be in the public interest, will the SCC modify its cost-benefit methodology and become more receptive to utility submissions?

Photo credit: Kent Mason

Onshore wind power. In an effort to create a lower-carbon electric generating portfolio, Apco announced plans last July to buy the Beach Ridge II Wind Facility in West Virginia and the Hardin Wind Facility in Ohio. The company proposed to finance the development of the two projects with an $84.6 million construction surcharge spread out over 10 years to ratepayers.

According to the Charleston Gazette-Mail, in early April the SCC denied Apco’s request to recover its costs from Virginia ratepayers. The commission said the company doesn’t need the additional power generation.

Apco argued that its electricity-demand forecast expects CO2/greenhouse gas regulation to be implemented by 2024. Indeed, Virginia appears to be poised to participate in the Regional Greenhouse Gas Initiative (RGGI), a regional cap-and-trade program that would shave Virginia utility CO2 emissions by 30% over 10 years. Final regulations are being drafted for approval by the State Air Pollution Control Board.

“The Companies would be justly faulted if, in their planning, they ignored likely and expected developments simply because they hadn’t yet occurred,” Apco said. “There are many influential elements in American society today that favor such regulation.”

Still, the SCC appears to be acting as a guardian of the rate payer’s interests, and it needs to be persuaded that the acquisition or construction of new power sources can be economically justified. Whether the Grid Transformation and Security Act changes the commission’s calculus remains to be seen. Continue reading

The Great Grid Grab

Who gets what from a Dominion-backed legislative package overhauling Virginia’s electric grid? At this point, there are more questions than answers.

Last week lawmakers friendly to Dominion Energy Virginia introduced sweeping legislation, The Grid Transformation and Security Act of 2018, which would increase investment in Virginia’s electric grid with the goals of increasing renewable energy, reducing power outages, and guarding against cyber-sabotage. Backers say the three-bill package also would restore rate-setting oversight by the State Corporation Commission after three years of a rate freeze, and return a cumulative $1 billion in refunds and rate reductions to customers over eight years.

The response from some of Dominion’s traditional foes was negative. Critics suggested that the legislation would neuter the SCC’s oversight powers even while nominally restoring them, thus allowing the utility to keep hundreds of millions of dollars due the rate payers.

“This bill is bad policy and dangerous, giving Dominion even more power over our lives and our future,” responded Tom Cormons, executive director of Appalachian Voices, a group that has helped lead the fight against Dominion’s Atlantic Coast Pipeline project, in a press release. “For far too long, the legislature has gone along with the monopoly’s plans, and it’s high time for our elected representatives to finally say ‘no’ to Dominion.”

In a Washington Post op-ed, Stephen D. Haner, a lobbyist representing the Virginia Poverty Law Center (and a frequent contributor to this blog), described the proposals as a “preemptive attack” on the SCC’s independence. “The outcome Virginia consumers should be hoping for is a return to full SCC authority and an almost immediate rate case to review the earnings during the recent regulatory holiday.”

However, environmental groups such as the Virginia Chapter of the Sierra Club, the Southern Environmental Law Center, and the Chesapeake Climate Action Network, which have combated Dominion over the pipeline, solar power, and coal ash disposal, have refrained so far from blasting the bill — at least in official statements. By packing environmental desiderata such as renewable power, energy conservation, electric vehicles, energy storage systems and microgrids into the bill, Dominion may have disarmed some of its critics.

The most comprehensive description of the package comes from Dominion. The summary that follows comes from an “overview” prepared by the company’s communications team.

Refunds and rate reductions. Refunds and rate reductions for rate payers  totaling more than $1 billion over the next eight years include:

  • $133 million in one-time credits.
  • $740 million in rate reductions achieved through elimination of the biomass rider and other riders.
  • $100 million annually from lower taxes resulting from the recently enacted federal tax reform.

State Corporation Commission oversight. The legislation restores SCC review of Dominion base rates but reviews base rates every three years instead of every two years, as it did before the freeze. The bill also adds SCC reviews before and after grid transformation investments are undertaken.

The legislation will reduce future riders (also called RACs, or Rate Adjustment Clauses), which are surcharges for new projects. States the Dominion summary: Before future riders can be added for new investments, the SCC will determine if there were overearnings. If there are overearnings, SCC will use them to offset the cost of future riders.

Grid transformation investments

The package allows for investments to build a more sustainable and resilient grid. These investments, summarizes the Dominion outline, aim to “reduce outages or restoration times, secure energy assets, enhance tools available to customers, and increase investments in renewable generation.” The investments can be grouped as follows:

Reliability investments

  • Automatically reporting of outages when they occur.
  • Prediction of certain outages before they occur so crews can be dispatched to equipment nearing failure.
  • Isolation of outages so fewer customers are impacted.
  • Reduction of voltage fluctuations to improve power quality for industrial and other customers.
  • Dispatch of crews more precisely to restore power more quickly.
  • Automated routing and restoration of service.
  • Better integration of renewable generation.
  • Installation of energy storage systems and microgrids
  • Strategic undergrounding of outage-prone lines.

Security investments Continue reading

The Energy-Efficiency Option

When Virginians contemplate their energy future, they have two broad options for accommodating a growing population and economy: generate more electricity (increase supply) and conserve electricity (reduce demand). The debate over the supply side of the equation gets most of the attention — what’s the best mix of nuclear, gas, coal and renewable energy sources? Energy efficiency gets less ink. But  investments in energy efficiency, say environmentalists, can not only reduce the pollution and carbon-dioxide emissions associated with electricity generation, they can effectively pay for themselves by obviating the need to build expensive power plants in the future.

That’s a great theory. How’s it working out?

From a public policy perspective, Virginia has lots of leeway to become more energy efficient. The American Council for an Energy-Efficient Economy ranks Virginia only 29th nationally in an energy policy scorecard that takes into account utility programs and policies, transportation policies, building energy codes, Combined Heat and Power (CHP) policies, state-led energy-efficiency initiatives, and appliance and equipment standards. (Virginia did move up three notches in 2017, however, by adopting the 2015 IECC building energy code and partnering in an initiative to conduct a residential energy code field study.)

The McAuliffe administration has set a goal of reducing electricity consumption by 10% by 2020, according to the Richmond Times-Dispatch. The main tools for achieving that reduction are programs managed by Dominion Energy and Appalachian Power to foster conservation by businesses and homeowners. Trouble is, those programs don’t always pass muster with the State Corporation Commission.

“Utility programs make up about 90 percent of the progress toward our 10 percent reduction,” says Chelsea Harnish, executive director of the Virginia Energy Efficiency Council.

Here’s the hitch. When Dominion subsidizes, say, weatherization of a poor person’s house or a homeowner’s purchase of a new, energy-efficient heat pump, all Dominion payers chip in for a program that benefits only those customers who get the new heat pumps or the insulation in their attics. “A lot of utility programs are not passing, not able to get approval from the State Corporation Commission, says Harnish. The SCC, she explains, is “concerned about nonparticipant costs.”

Writes the Times-Dispatch:

In an order this year that rejected Dominion home-energy assessment and residential heat-pump upgrade programs, the commissioners said they could not find that the so-called demand-side management programs were in the public interest.

“We are sensitive to the impact of the proposed DSM (demand-side management) programs on customers’ bills, particularly the bills of customers not participating in the programs,” they wrote.

Part of the problem, Harnish said, is the challenge of calculating the value of such programs.

“What we hear from the SCC time and time again is they’re skeptical of deemed savings,” said Harnish, referring to industry-standard formulas that predict a certain benefit, such as the amount of energy use cut by installing LED light bulbs, for example. The SCC is currently receiving input on uniform standards for what the energy-efficiency industry calls evaluation, measurement and verification should look like, she said.

Another barrier to energy conservation is a price of electricity in Virginia that is below the national average. Explains Dominion spokesman David Botkins: “The costs of energy avoided for a given program is less than would be avoided in some other parts of the country, due to the higher cost of electricity elsewhere. This causes the economic value and cost-effectiveness of energy-efficiency programs in Virginia to be lower than in some other regions.”

By most peoples’ standards, lower electric rates are a good thing. Likewise, many electricity customers undoubtedly are pleased that the SCC is protecting their interests as rate payers from programs generating an uncertain payback. But there may be ways to promote energy efficiency that don’t go through the SCC. The Virginia Energy Efficiency Council is pushing stricter building codes  and performance-based contracting for state-owned buildings. Under performance-based contracting, government agencies repay energy service companies out of the savings generated through lower utility bills.

Bacon’s bottom line: In my observation, the biggest obstacle to energy-efficiency is that the state and local government budgets have time horizons too short to allow investing in conservation. A high-return energy-efficiency project might pay itself back in three to four years — a handsome return. But the Commonwealth operates on two-year budgets, while most local governments go year-to-year. If a project doesn’t recover its costs within the current fiscal year, it can’t be justified. That’s just crazy. Surely there is a work-around.

A Fourth Force in Virginia Energy Politics

The political economy of energy in Virginia used to be simple. Three main interest groups contended to formulate energy policy in the state: environmentalists, consumers, and electric utilities. Consumers, both homeowners and businesses, pressed for lower electric rates. Environmentalists fought for cleaner air and, more recently, lower CO2 emissions. And utilities — the only parties responsible for keeping the lights on — lobbied for reliability at a reasonable cost (within a framework that preserved profits).

In the last few years, a fourth force has entered the picture, and the political dynamic is changing. The Old Dominion has seen a surge in the number of small, independent solar- and wind-power developers. They have exercised limited political clout, but now large, national corporations embracing a green energy agenda have entered the fray.

Half the Fortune 500 companies have committed to green agendas, and they signaled their desire earlier this year to see policies in Virginia that were friendlier to wind power, solar power and energy efficiency. (See “Clean Energy Options and Economic Development.”) Their message: If Virginia wants to attract outside corporate investment, the state had better get on board the solar-powered electric train.

Then, in an unprecedented flexing of political muscle last week, a green industry group injected itself into the Virginia gubernatorial race. Advanced Energy Economy (AEE), an association of green industry companies, delivered a policy memo to the campaigns of GOP nominee Ed Gillespie and Democratic nominee Lt. Gov. Ralph S. Northam.

“Evolving consumer preferences, dynamic new technologies and aging infrastructure are causing the energy system as we have known it to modernize,” states the memo. AEE outlines four priorities:

  • Allow competitive procurement to attract investment and benefit consumers. Virginia energy policy should open up third-party market alternatives. “While current Virginia law allows competition in statute, more could be done to attract investment and benefit consumers.”
  • Expand access to advanced energy options. The ability to control energy costs is a factor in where many corporations choose to locate. But they’re not just looking for cheap energy — they want green energy.
  • Maximize energy efficiency and demand-response. Under Virginia regulatory regime, electric utilities lose money when customers reduce their electricity consumption, discouraging utilities from investing in energy efficiency programs and demand response. Virginia should “decouple” electricity sales from profitability so utilities don’t lose when they invest in energy efficiency and demand-response programs that cut sales.
  • Modernize the electric grid. Evolving consumer preferences, new technologies, and the need to replace aging infrastructure have created a need to modernize the electric grid. The regulatory system, which inadvertently stifles innovation, needs to be modernized.

AEE wants more wind and solar, more electric vehicles, more energy efficiency, more innovation, and more freedom for entrepreneurs to design solutions for customers. At the same time, the association acknowledges that the way to achieve these aims is not to browbeat electric utilities into submission but to change their incentives, which would take a major re-writing of regulatory law.

Bacon’s bottom line: To advance AEE’s vision, Virginia would need an upgraded electric grid flexible enough to accommodate a less centralized, more distributed grid while still maintaining system-wide reliability. In effect, the green businesses are calling for a deregulation of electric power production. But no one wants to build a competitive and redundant electric transmission-distribution system.

Any viable energy system of the future must allow electric utilities to continue investing in, and earning a profit on, their transmission-distribution systems. Also, deregulation of electricity generation would require grappling with the issue of “stranded” investments — investments in generating capacity that utilities made in good faith under the existing regulatory environment that might not be economical and must be scrapped in deregulated environment.

Like the environmental movement, this Fourth Force in energy politics wants to see a fundamental transformation of Virginia’s electric power system. Unlike the environmentalists, many of whom see Dominion and Appalachian Power as the enemy, the Fourth Force acknowledges the need for a healthy utility sector. This new interest group has plenty of money, which means it can afford to hire lobbyists and spread cash to political campaigns. Plus, these new voices will be more credible to Virginia’s pro-business legislators than the more strident environmentalists had been. 

The politics of electric power in Virginia has reached an inflection point. We are entering a new era.

Conservation Voltage Reduction: Dominion’s “Fifth Fuel”

Todd Headlee, director of Dominion Voltage Inc., shows off the in-house electric circuit the company uses to model upgrades to its conservation voltage reduction system.

Todd Headlee, director of Dominion Voltage Inc., shows off the in-house electric circuit the company uses to model upgrades to its conservation voltage reduction system.

  • Dominion Voltage Inc.’s Conservation Voltage Reduction (CVR) system has the potential to cut U.S. electricity consumption 2-4% for relatively little cost.
  • The EDGE technology eases integration of small-scale solar and wind energy sources into the electric distribution network.
  • Dominion expects the market for EDGE to take off as electric utilities invest heavily in grid modernization over the next decade.

Nine years ago the Commonwealth of Virginia produced a state energy plan that included among its objectives the cutting of electricity usage by 10% over ten years. That directive landed on the desk of Phil Powell, planning director for Dominion Virginia Power, Virginia’s largest electric utility.

After surveying a host of energy efficiency strategies, Powell focused on one called Conservation Voltage Reduction (CVR). The idea behind CVR is to save energy by reducing the voltage on electric lines.

Electric companies must maintain their tap lines between 114 volts and 126 volts. Keeping within the low side of that range saves electricity, but power companies err on the side of caution. Voltage varies by distance from the sub-station and local fluctuations in the electric load; dropping below 114 volts can cause damage to machines, appliances and other devices. If it were possible to measure voltage on the grid with greater precision, Powell knew, Dominion could eke out a meaningful reduction in electricity consumption.

Electric companies had experimented with conservation voltage reduction, but they relied upon guesswork that made them reluctant to reduce voltage aggressively. As it happened, Powell also was involved in a Dominion pilot project to deploy smart meters that could provide the very voltage information he needed. “I was looking at CVR and smart meters at the same time,” he says, “and I began thinking about how to use them together.”

Powell assembled an ad hoc group to noodle the problem. Working on their own time, they tested their solution on an electric circuit where all the houses were equipped with smart meters. One of those houses, not entirely coincidentally, was Powell’s. From his home, he monitored the neighborhood voltage as people turned their HVAC, lights, TVs, dishwashers and dryers on and off. The technology worked like a charm. Not only did it conserve electricity, but Powell discovered that the system could give a heads-up when customers encountered voltage-related issues. The company could dispatch a crew to fix the problem almost before customers knew they had it.

Powell’s tinkering formed the basis of supervisory control and data acquisition product, EDGE, which Dominion hopes will help propel the electric grid into the 21st century. The company sees two vital applications. First, EDGE has the potential to shave electricity consumption by 2% to 4% globally if deployed across utilities’ entire service territories — equivalent to the output of dozens of utility-scale power plants. “This is a great environmental service to the world,” says Todd Headlee, executive director at Dominion Voltage Inc. (DVI), the non-regulated enterprise created to commercialize the product.

Second, the technology makes it easier to integrate rooftop solar into the distribution grid on a large scale. As a rule of thumb, a local distribution circuit cannot accommodate more than 20% solar capacity, due to rapidly changes in output, Headlee says. “With our product, we hope a circuit can get up to 80% capacity,”

DVI is doing business in Hawaii, California and other states where there are energy efficiency mandates and solar power is taking off.  The company also is pursuing business in Canada, Europe and Asia. where many of its patents have been approved.

Major regulatory barriers exist in many states, but the potential energy savings are so massive that Headlee is confident that conservation voltage reduction will take off. “Ten years from now,” he predicts, “every utility will be doing CVR, either with our technology or a competitor’ because the benefits are too big to ignore.” Continue reading

Measuring and Evaluating Energy Efficiency

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Virginia’s investor-owned gas and electric utilities administer 38 programs between them that are designed to increase energy efficiency or shift consumption away from periods of peak demand. The question periodically arises: Are these programs worthwhile? Do they save rate payers money?

Those are questions that most Virginians can readily understand. But getting answers isn’t so easy.

The answers depend on how one goes about evaluating, measuring and verifying the programs (a set of issues referred to in the biz as EM&V). How does one calculate the “Levelized Cost of Saved Energy” (the present value per kilowatt-hour of an energy-efficiency program over its economic life)? How does one construct the Total Resource Cost Test (an indicator of total program costs, including those of ratepayers and utilities)? What is the methodology behind the Ratepayer Impact Measure Test (known as the RIM test, which ascertains the impact of energy-efficiency measures on gas and electric rates)?

For the layman, these arcane issues “surpasseth all understanding,” to borrow a phrase from Philippians. But Virginians can take some comfort in the fact that the SCC is on top of the job. Earlier this year, the commission held a hearing attended by 20 interested persons and entities (whose comments were supplemented by 23 written submissions) to discuss how the energy-efficiency programs should be evaluated.

After deliberating on these matters of great complexity and subtlety, the SCC issued a report today finding that the system can be fine-tuned. Accordingly the commission has directed its staff to draft proposed rules to be considered in a future proceeding.

Wrote the commissioners:

The goal of the proposed Rules is to achieve, to the extent, possible, reliable and consistent estimation of energy savings and related impacts at a reasonable and appropriate cost; to provide guidance to utilities in planning and offering energy efficiency programs, and to provide a transparent basis for assessing cost-effectiveness of proposed programs.

One issue I found interesting (mainly because I found it comprehensible, unlike much of the report) is how to estimate kilowatt-hours of electricity saved. Most approaches rely upon Technical Resource Manuals (TRMs) that provide “deemed values,” or industry assumptions derived from professional judgment and engineering calculations — not from direct measurement. The problem is that industry averages may not apply to Virginia. Opines the SCC: “These estimates can introduce considerable inaccuracy into estimates of  energy savings.”

Therefore, the commission declared that estimates of kilowatt or kilowatt-hour savings “should be, where possible, based upon Virginia-specific data so as to reflect as closely as possible the actual savings achieved.”

The hoped-for benefit: If your utility offers an air duct-testing program, an appliance-recycling program, or rebates on Wi-Fi programmable thermostats, the SCC has thoroughly vetted them as cost-effective.

Pay a Man’s Electric Bill, and You Keep Him Warm for a Month. Weatherstrip His Home, and…

IMG_1494

Governor Terry McAuliffe earned his pay Thursday the old-fashioned way, doing weatherization work in Northern Virginia, Hampton Roads and Central Virginia. Here, he applies plaster to an uninsulated vent at the home of Diane Hunter in Petersburg. (Sorry, folks, I couldn’t get a better shot because there was a mob all around him — and the state police blocked my best camera angle!)

Dominion Virginia Power is expanding its Energy Share program from the poor and elderly to veterans and the disabled.

by James A. Bacon

Mary Jones has lived in her house on Petersburg’s Warren Street for 36 years. Since the death of her husband three years, she’s lived there alone — “just me and the lord,” she says.

She worked most of her life, first at Central State in food service and later as home care worker, but the 85-year-old is retired now. Although she owns her house, she hasn’t paid off the mortgage, and she counts every penny. She doesn’t run the air-conditioning when she’s alone, and she doesn’t leave a lot of lights on. Still, her electric bill runs about $70 per month on average — and that doesn’t include the gas bill for her stove and hot water heater.

Working through the Crater District Agency on the Aging, Jones qualified for an energy-efficiency makeover from Dominion Virginia Power’s Energy Share program. A team of volunteers swooped in to insulate her attic and hot water pump, install LED light bulbs, and apply caulking and weatherstripping. According to Dominion’s estimates, she should save about $20 monthly on her electricity bill. That’s enough to make a difference in her life, she says.

Jones told her story Thursday as part of an annual P.R. blitz Dominion puts on to promote the program. This year, the power company received a big hand from Governor Terry McAuliffe, who spent the better part of his day visiting homes in Northern Virginia, Norfolk and Petersburg, making a show of doing weatherization work, and touting the program. Dominion used the excitement generated by the governor’s visit to hand out energy-efficiency kits (retail value $12) and pass out literature to curious neighbors.

Energy Share started in 1982 as a program in which Dominion employees, customers and friends donated money to help the poor and elderly who had trouble paying their gas and electricity bills. Last year, Dominion expanded the program to include weatherization, committing $57 million to the effort over five years.

“It’s one thing to help people pay their bills,” said Ed Baine, senior vice president-distribution. “It’s another to help them reduce their bills over time.”

Terrence Moore, a customer project designer for Dominion, was one of a half dozen volunteers who took the day Thursday to weatherize Mary Jones's House. Here, Moore installs a carbon-monoxide monitor.

Terrence Moore, a customer project designer for Dominion, was one of a half dozen volunteers who worked Thursday to weatherize Mary Jones’s House. Here, he installs a carbon-monoxide monitor.

Last year Dominion employees donated 100,000 hours of time doing home weatherization, attended 200 events and talked to 120,000 people. This year McAuliffe, who has emphasized energy efficiency in his energy plan for Virginia, challenged the company to extend the program to veterans and people with disabilities, which the company has agreed to do.

The program helps the needy and protects the environment, McAuliffe said in Petersburg. Energy consumption releases C02 emissions into the atmosphere, which warms the climate, which causes icecaps to melt, which causes the sea level to rise. “Sea level rise is real. It’s happening,” said McAuliffe. After New Orleans, Norfolk is more vulnerable to sea level rise than any other U.S. city, and it’s a concern of the U.S. Navy, which bases the world’s largest naval base there. “The Secretary of the Navy wants to know that we’re taking these issues seriously,” he said. Fighting global warming is an environmental issue and a pocketbook issue.

It’s obvious why McAuliffe promotes energy efficiency. But why would Dominion? After all, the utility makes money by selling electricity. Isn’t it undercutting its own business by investing in programs like Energy Share that reduce consumption?

Here’s how spokesman Bob Richardson responded: “The purpose is to encourage customers to reduce their energy consumption which reduces stress on the electrical grid at specific times when demand on the system is high. Dominion uses financial incentives (typically rebates) to customers to reduce consumption or make it financially easier to install measures to save energy.”

Besides Energy Share, Dominion has six energy-efficiency programs aimed at residential customers, including a $40 rebate for cycling air-conditioning on high-use days, energy audits, heat pump tune-ups, heat pump upgrades, duct sealing, and replacement of old, inefficient appliances with energy-efficient ones. The company offers comparable programs for non-residentual customers, as well as incentives for users to shed load during peak demand by operating customer-owned backup generators.

Dominion has proposed other energy conservation programs but they have not passed muster with the State Corporation Commission. One program would have installed WiFi-connected, programmable thermostats in houses and tracked how customers used them so Dominion could design future programs around the technology. The SCC disagreed with assumptions in Dominion’s cost-benefit analysis and said the cost of the program was too high, says Richardson.

The SCC has rejected other programs, but later approved them after Dominion went back to the drawing boards. For example, says Richardson, the SCC denied a small business improvement program due to concerns about eligibility; Dominion revised the program design, and the SCC accepted it. Another program encouraged non-residential customers to upgrade to higher-efficiency lighting. In rejecting that program, the commission indicated that additional cost-benefit justification was needed. Dominion addressed the concerns, says Richardson, and the commission gave its OK.

Ultimately, the decision for funding utility-sponsored energy-efficiency programs is up to the SCC, which is charged with balancing cost, reliability and environmental considerations. Critics say Virginia lags other states in embracing energy efficiency, bu it harder to justify charging energy-efficiency programs to ratepayers in Virginia than in many other states because rates are lower than the national average, which offers a lower payback for the same investment. However, environmentalists argue that well-executed investments are cheaper than building new gas-fired gas plants, while programs that shift electricity demand would make it easier to integrate carbon-free solar and wind electricity into the electric grid.

Incubating Big Ideas

Wei Zhang in his lab.

Wei Zhang in his lab.

by James A. Bacon

Wei Zhang, a research scientist at the Virginia Commonwealth University School of Engineering, concluded that the polymer coatings he was studying had commercial potential. The chemical, when applied to power lines, aircraft wings or wind-turbine blades, would prevent ice from building up. By affecting the surface bonding at a molecular level, the coating would release the ice before it became too heavy.

The science was promising enough that he won a $150,000 Small Business Innovation Research (SBIR) grant to develop it further. He needed a business incubator with low overhead and business support that would allow him to pursue the technology. Fortunately, he found a suitable location — the Dominion Resources Innovation Center. The incubator, founded in a partnership between Dominion Resources, Hanover County and the Town of Ashland, specializes in the technology and energy sectors, providing early-stage companies with inexpensive office space, mentoring, guidance and business support.

“Scientists running a company don’t do well by themselves,” said Zhang yesterday at a re-launch of the innovation center at a new location in Ashland. But the board of directors gave him valuable advice, and he got a useful letter of support from Dominion stating that the electric power industry needs his product. Zhang even worked with Town of Ashland staff to develop applications for protecting landscaping from freezing.

The work went so well that Zhang’s company, Polymer Exploration Group (or PEG for short), won a second-phase, $750,000 SBIR grant take the product to the next stage, as well as a National Institutes of Health grant to use the polymer to develop an anti-microbial coating. At present, Zhang can produce only small volumes of the polymer — a half-liter at a time — and a major challenge is to ramp up his production capability. He sees huge markets anywhere ice is the enemy. At the moment, he says, the most immediate market appears to be fishing boats in the North Atlantic and North Pacific.

PEG, which now employs five, including Zhang, is only one of several promising enterprises to emerge from the incubator, which initially was housed in an old warehouse. The new facility, shared with town public works employees, is located in downtown Ashland in the old volunteer fire department building. The incubator provides nine single-room offices, including three wet labs. The mentoring and support is just as important as the space, if not more. The hands-on board provides a network of contacts and relationships that someone like Zhang, a Chinese national who has lived in Richmond since 2000, would find incredibly time consuming to replicate.

Mary Doswell, Dominion’s senior vice president for alternate energy solutions, said the company committed to support the incubator in 2009 to “send a signal to the community about our interest in innovation.” Now, she said, the incubator is being integrated with Virginia Commonwealth University, the Virginia Biotechnology Research Park and the Innovation Council to create “a regional innovation ecosystem.”

Although Dominion does not insist that tenants work on technologies that interest the power company, things have worked out that way. Dominion could be a customer eventually for Zhang’s ice-shedding polymer, and it could be a partner of Analytics Corp., to commercialize what founder Weston Johnson calls a high-efficiency, high-torque motor that operates at low speeds. That particular cluster of attributes, says Johnson, has applications ranging from industrial fans to wind turbines.

Johnson, who earned a Ph.D. in electrical engineering from the University of Kentucky, launched an earlier business — a hand-held spectrometer to be used by law enforcement — that didn’t turn out so well. But the experience taught him a lot and prompted him to move back to Richmond, where he started work on an idea he had developed in his Ph.D. dissertation. Johnson’s insight is that new materials invested by the semiconductor industry for use in microelectronic circuits make it possible to run motors with electric fields rather than magnetic fields. The process eliminates parts and drives down costs. He claims that the technology, if perfected, could drive down the installation cost of a wind turbine by 40%.

Johnson launched his business with $200,000 raised from family and friends. Locating in the Innovation Center was critical to his success, says Johnson. “The Center provided skill sets that I didn’t have to hire.” Zhang, he says, was an especially valuable sounding board. He has nearly completed his prototype, which he hopes will provide proof of concept ideas and win him another round of investment that will let him build a field-demonstration model.

Only a handful of enterprises emerging from incubators ever create enduring businesses. Zhang and Johnson, both of whom have acquired their own facilities, still have many obstacles to surmount before creating sustainable business models. Whatever their prospects, there is no denying that the Dominion Innovation Center succeeds in incubating big ideas.